Asheville City Council

• Local job growth on track with rest of state
• Survey results questioned
• Council open to Mills River negotiations

The nationwide economic downturn has made its way to Asheville, as the city grapples with how to handle an anticipated $1 million budget shortfall based on the results for the first quarter of the 2008-09 fiscal year (which began July 1). Concerned about the shortfall, city staff is already looking ahead to the next fiscal year, when a potential $5.3 million gap is possible.

How high’s the water? Asheville’s Mills River water-treatment plant, which Henderson County has informally offered to buy. Council members say they’re open to discussing the water relationship but want Henderson Commissioners to bring suggestions to the table. Photo by Jonathan Welch

At the Asheville City Council’s Nov. 18 work session, Chief Financial Officer Ben Durant said the shortfall in the current budget is due primarily to lower-than-expected sales-tax revenues in a weak retail market. First-quarter sales-tax revenues are now expected to be 1.5 percent below the budget projections, with September’s numbers (which won’t be in for another two months) off by as much as 19 percent. That severe a drop, he noted, has rarely been seen.

“This is first time I can remember [that] since I’ve been here,” said Durant.

To bolster his case, Durant displayed data dating back to the early ‘90s, when a national recession slowed the growth of sales-tax revenue. And during the recession of 2002-03, those revenues actually shrank two years running—a scenario that could come up again next year, said Durant.

“If the recession ends up [getting] worse … we could see the trend again,” he warned.

In response, Durant and city staff have been working on potential budget cuts and adjustments to make up the $1 million, such as postponing vehicle purchases, reassigning money saved on Civic Center improvement projects, departmental line-item reductions, and a hiring freeze on several vacant staff positions.

Durant also projected a decline in Asheville’s fund balance, from 20.3 percent of the budget to 19.6 percent. But that is still well above the 8 percent recomended by the state’s Local Government Commission and the city’s own minimum target of 15 percent.

As for the $5.3 million hole in the 2009-10 budget, Durant acknowledged that it calls for drastic action.

“We don’t really think we can come back to you with a [draft budget showing a] gap of $5.3 million,” he said, explaining that staff and City Council will have to figure out what doesn’t get funded next fiscal year. “We’ve got to ask ourselves what can we really afford.”

At the top of the list, said Durant, are cuts in the allocations for cost-of-living adjustments and merit-pay raises, incentives for early retirement, and suspending the city’s annual payment into the Housing Trust Fund. The fund provides low-interest loans to developers building affordable housing, and the city has been contributing $600,000 annually in recent years.

Survey says: Council discussed the results of a recent public-opinion survey on quality of life in Asheville. The slide above shows that residents gave the city high marks for overall quality of life. The one below shows the low grade respondents gave for transportation options.

But Durant said the fund was always intended to eventually be self-supporting, and maybe it’s time to cut the apron strings. Together, those cuts would trim next year’s budget gap by about $2 million, he noted.

But Council member Holly Jones, who’ll be moving over to the Buncombe County Board of Commissioners in December, took issue with that approach. Affordable housing has long been one of her key concerns, and funding for it, she said, is often seen as an easy cut in hard times.

“The Housing Trust Fund is always put up there first,” griped Jones, suggesting that Durant instead find a way to “spread the pain” by distributing cuts more generally across the budget.

Durant responded that he’d already inflicted plenty of pain by taking $1.25 million out of the salary allocations, noting, “That’s going to hurt.”

Mayor Terry Bellamy said city staff will continue searching for potential cuts to make up the sales-tax shortfall, and Council will make the final choices. “We’re going to be taking serious considerations for the direction of our city,” she said. And later in the meeting, she observed: “I hope the community will understand. We’re making some [cuts] that before I never would have considered.”

Good news, bad news

Despite the gloomy financial report, Asheville’s job growth compares favorably with that of other cities both in North Carolina and nationally. In his report on the state of the Asheville Metro Area’s economy, Robert Sipes, chair of the Economic Development Coalition for Asheville-Buncombe County, told Council that Asheville has the lowest unemployment rate among the state’s metro areas. And as of September, the metro area’s string of 55 consecutive months of job growth was still intact, though the rate of growth had slowed some. “It is a track record we are proud of,” he said.

In light of that, said Sipes, the coalition’s current priority is preserving the jobs that are here, especially since it appears that everyone will be battening down the economic hatches during the next year.

“‘A bird in the hand is worth two in the bush’ is very apropos of our efforts,” he observed. “We’re blessed with a relatively stable economy here in Asheville. [But] we think 2009 is going to be a relatively lean year.”

Meanwhile, yet another report summarized the results of a survey sent out to Asheville residents over the summer, but some on Council had doubts about their significance.

Analyst Paula Noble of the National Research Center—a Boulder, Colo., consulting firm hired by Council back in April—said that 1,200 surveys were mailed out, along with follow-up letters urging residents to participate, and 402 people responded. (The survey results are available on the city’s Web site.)

Assistant City Manager Jeff Richardson said the results will help determine priorities for city staff.

But Council members feared the responses may have been skewed by certain high-profile events taking place at the time the survey was mailed—notably, said Bellamy, the Parkside/Pack Square drama. “This was at the height of what was going on out front,” she said.

Noble, however, emphasized what she called “opportunities”: issues such as transportation, public safety and development, where respondents ranked the city below the national averages.

Unconvinced, Bellamy posed further questions, wondering whether the responses were a result of perceptions or reality.

But the survey, said Noble, doesn’t provide that kind of analysis. “Surveys often tell us what but not why,” she explained. Although 32 percent of respondents said they were unemployed, for example, the survey doesn’t indicate whether they were retired or were seeking employment, she noted.

Vice Mayor Jan Davis also voiced misgivings about the results. “I’m a bit skeptical of surveys like this that are so dependent on what’s going on at the time,” he said. And the low response rate, added Davis, suggests that only people with a bone to pick took the trouble to send back the survey.

Meanwhile, staff will continue reviewing the results, said City Manager Gary Jackson, and Council members can resume the discussion at their retreat in January.

Drop by drop

Four days after the Henderson County commissioners informally offered to buy the Mills River water-treatment plant, Council members seemed to be open to at least discussing Asheville’s water relationship with the neighboring county. The city acquired the plant site via a 1995 land swap with Henderson County, and Asheville currently sells the city of Hendersonville 1 million gallons of water per day from the plant.

At a Nov. 14 meeting, three Council members (Bellamy, Davis and Newman) agreed to serve on a committee along with two Henderson County commissioners to consider possible solutions to the county’s concerns that it’s been elbowed out of the regional water picture (see “The Big Kibosh, Nov. 19 Xpress).

Back in the Council chamber, however, Council member Brownie Newman said he’d like to see that conversation happen in an open forum.

Jones, meanwhile, said she likes the subcommittee format, because it may encourage fruitful discussion.

But Henderson County, noted Newman, hasn’t even gone so far as to name a price. “If it’s something they want to talk about, they need to put a proposal out there,” he said.

“I’m not sure they have a really defined thought,” responded Davis, adding, “They were pleased we were willing to discuss it.”